It says its 6.2% stake is long-term investment, not trading position.
OCBC Bank has rejected the respective takeover bids for The Straits Trading Company (STC) by the Lee family’s Knowledge Two Investment and the Tan family’s The Cairns.
‘The 6.2 per cent stake in STC held by OCBC represents a long-term investment, not a trading position, notwithstanding that it is classified, for accounting purposes, as ‘available for sale’,’ it said yesterday in its first response to the takeover battle for STC.Knowledge Two raised its offer on Thursday to $6.55 per STC share, in response to The Cairns’s renewed offer of $6.50 per share on Jan 28. It had similarly pipped its rival’s initial offer of $5.70 early last month with a bid of $5.76.
Quipped a Lee insider, don’t forget ‘OCBC stands for only can borrow coins’.
The Cairns is a privately held investment firm controlled by family members of the late Tan Chin Tuan who was chairman and managing director of OCBC for two decades. Mr Tan had been a faithful employee of the Lee family who founded OCBC and he had been instrumental in acquiring a stable of companies and properties for them.
OCBC said that it has held the STC shares as a long-term investment for many years, and the investment has yielded attractive returns. Over the three-year period ended Dec 31, 2007, STC shares achieved a ‘total shareholders’ return’ (income from dividends plus capital gains) of about 40.7 per cent per annum, it said.
The bank noted that it had not sold any STC shares for many years, other than about 27 million shares in 2006 to comply with regulatory requirements.
It also pointed out that the combined stake of 33.4 per cent held by OCBC group, Great Eastern Holdings group and the Lee group of companies represents the single largest block of shares in STC.
‘If the three substantial shareholders all wish to realise their investments, such a sizeable single largest block could command a significant control premium from strategic buyers.’
Besides control premium, OCBC also sees the potential for the three to ‘exercise their influence’ on STC directors to continue or accelerate the unlocking of value for the benefit of all STC shareholders.
‘The financials of the STC group suggest that there exists significant room for leverage and accordingly some values to be unlocked from a more efficient capital structure.’
OCBC intends to seek board representation on STC and request that a financial adviser be appointed, after the close of offer, to recommend ways to unlock and enhance shareholders’ value.
OCBC noted that Knowledge Two has indicated that it would take similar steps to further unlock value in STC for the benefit of shareholders. ‘Knowledge Two’s intended efforts are aligned with those of OCBC.’
The bank closed its statement yesterday by saying that should there be any further development, it would further evaluate and decide accordingly.
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